Computers ain’t anything like cars

Carmi Levy, 19th May 2009

Analyst Opinion - When I wrote last week’s column suggesting Apple consider a move downmarket to expand its computer/OS market share and avoid being perpetually marooned in niche territory, I suspected it might touch off a bit of a kerfuffle. But like any debate involving Apple, small kerfuffles quickly become big ones. Few companies these days generate the level of passion that Apple does.

Or, apparently, the same level of misunderstanding. In the interest of true dialog, I wanted to address some of the major issues raised in comments since the piece first published:

1. If elitism works for Porsche and BMW, it’ll work for Apple, too

Let’s get something straight: cars are nothing at all like computers. Automakers make money on each car sold, then on service after the fact. Computer vendors make barely any margin on the hardware, and rely far more heavily on the markets that surround their products. Apple is currently exceptional in this regard, but my point was that this won’t last forever. Apple’s hardware margins are already eroding faster than the industry average, and sooner or later, the Cupertino firm will need to make money from software and services sold through a large ecosystem of developers and other third party, value-added service providers.

To truly thrive, Apple’s market share needs to be far larger than the fewer than 10% of consumers willing to pay a premium for high-end hardware. That’ll only happen with lower-priced offerings in addition to their existing four-figure products.

2. The masses don’t appreciate Apple’s great quality

Newsflash: Not everyone is willing to spend $1200 or more for a computer. Similarly, not everyone appreciates the difference in quality between an iMac that sells for that amount, and a basic Windows machine that sells for half that.

Apple fans can look down their noses at PC bargain hunters all they want, but the truth is there are a lot more bargain hunters than fanboys with money to burn.

3. Apple’s profitable, so it doesn’t need to change

I’ll bet IBM said the same thing a generation ago. Likewise Microsoft a decade back. Even mighty GM saw itself as invulnerable for much of its history.

Let’s clarify something else: Just because something’s been working for some time doesn’t mean it’ll work forever. The world changes quickly, and companies that rely exclusively on the past for guidance do so at their peril. Is Apple guilty of this? Absolutely not. But a quick perusal of the comments section suggests many Apple fanboys think the company should simply keep on making premium hardware to the exclusion of all else. But if rabid Apple supporters were any more than a small minority, Apple would actually own the market. The majority of actual computer buyers I speak to would add Apple to their buy list if the company broadened its pricing strategy.

Carmi Levy is a Canadian technology analyst and journalist covered with scars from his years leading IT help desks and managing software development projects for big bad insurance companies. He comments extensively in a wide range of media, and works closely with clients to help them leverage technology and social media tools and processes to drive their business.